How Friday's stock market action sets up Monday's moves

Price Action & Setup Analysis

If three days leading up to Friday stretched the rubber band tightly… then can Friday’s dip back their low be considered a snap-back? There should be some offset. But Friday’s lows held tests of those lows, and bounced into the close. Hardly punative.

Pattern points… (Setups and technicals)

Like each of the three preceding sessions, Friday’s buyers cannot be considered to have gained traction for their efforts. Reversing the probe of new highs isn’t even the deciding factor. Buyers gained no traction because the close was not positive. It was unchanged from Thursday’s 1877.00 close. Which didn’t prevent trending higher after the close to 1878.50.

Friday’s pre-open high was the knee-jerk reaction to the Employment Situation report. That’s the definition of weak-handed, and not requiring retest intraday. Of course, then a dip was retraced to a fresh high. That introduced complexity. Consequently, the 1877.50 pre-open high is a “new Globex trend extreme” requiring retest intraday.

But not within any particular time frame.

Perhaps Monday’s open will retest Friday’s pre-open high. Still, be on guard though the open for the extreme sentiment to become a sentiment extreme. And don’t be too complacent that the highs will be tested next, instead of launching a new downleg.

What’s Next… (Outlook and opportunities)

This weekend’s Saturday Strategy Session begins at 9:30am ET, and we’ll discuss the bigger picture along with any stock requests.

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.

About the Author

Rod David develops analytical techniques that are designed to efficiently identify targets and turning points for any liquid stock or market in any time frame. He primarily analyzes S&Ps, generating several round-turn candidates daily. Rod publishes "Trading Plan" and more each session at the blog http://IfThenSignals.com.